Vietnam’s Manufacturing Purchasing Managers’ Index (PMI) came in at 54.1 in April, down slightly from the 22-month peak of 54.6 in March but still signaling health in the sector at the start of the second quarter, Nikkei has said in its latest report.

Strong growth in new orders continued to support rises in output, employment, and purchasing activity in Vietnam’s manufacturing sector during April. In particular, a survey-record increase in new business from abroad was recorded. Elsewhere, there were some signs of inflationary pressures easing, with both input costs and output prices increasing at the weakest rates in six months. Business conditions have now improved in each of the past 17 months, the report noted.

A sharp rise in new orders was central to the latest improvement in operating conditions, with new business from abroad increasing at a survey-record pace. The rate of growth in new export orders has now quickened in three successive months.

Panelists linked expansions in both total new business and new export work to strengthening client demand. New orders have increased continuously since December 2015. Growth in new work led manufacturers to increase production again in April. The rate of expansion was marked, albeit weaker than March’s 22-month high.

The rise in production enabled firms to work through outstanding business despite strong new order growth. The fall in backlogs of work was the first since the end of 2016. Stocks of finished goods also decreased, with some reports of products being delivered from warehouses.

A further impact resulting from the rise in new work was a pick-up in purchasing activity by Vietnamese manufacturers, according to the report. The rate of expansion remained sharp and contributed to a tenth successive monthly rise in stocks of purchases. Some panelists were quoted as having increased inventories in anticipation of further new order growth in the coming months.

Employment increased for the thirteenth successive month as firms responded to new order growth. The rate of job creation eased, but remained solid. “Confidence around future rises in new business was also a factor behind continued strong optimism with regards to production over the next year,” the report stated.

Also, higher demand for inputs encouraged suppliers to increase their prices during April, thereby leading to another monthly rise in input costs. There were also some mentions of higher prices for goods from China. However, the rate of cost inflation eased to the weakest since last October. Output prices also rose at the slowest pace in six months as charges were increased only modestly. Where factory gate prices rose, this was largely in response to higher input prices.

“A record rise in exports was the key highlight from the latest Vietnam Manufacturing PMI survey as firms once again displayed a good ability to secure new work in international markets,” said Mr. Andrew Harker from IHS Markit, which compiles the survey.

“This success fed through to improvements throughout the sector, with production, employment and purchasing activity all rising solidly in April. The manufacturing sector therefore remains a star performer in Vietnam at the start of the second quarter.”